Monday, June 8, 2009

Of Villains, The Economy, & On-Rushing Trains

That picture about sums up the state of our nation. Put Obama, Pelosi, and Reid in place of the villain. Sub our economy for the damsel in distress. Consider the on-rushing train to be our massive debt, massive borrowing, declining GDP, unemployment, inflation, and Obama's war on business. And quite literally on the heels of those are Obama's massive spending plans that have yet to hit, including cap and trade and socialized medicine. Tack on as the caboose the social security and medicare time bombs waiting in the wings for their cue to take center stage. And all of that does not even consider yet another seeming certainty - a coming massive jump in fuel prices brought on by Obama's war on fossil fuels and his backsliding on promises to allow us to exploit our natural resources and to begin building nuclear plants again. If you are not worried sick about what Obama is doing to our economy, then you are simply not paying attention.

The only thing that does not appear in the above picture is the MSM. The MSM, our supposed watchdog, are asking none of the hard questions. In the past week, for example, instead of asking about the ramifications of Obama's plans to tack yet even more massive spending and borrowing on top of our teetering economy, we have the editor of Newsweek and Chris Matthews speculating on whether Obama is actually a deity. We have masses of people going into unemployment, and instead of stories about how the Obama projections of unemployment were grotesquely off - or how the stimulus isn't stimulating - we instead are treated to stories of how our modern day Marie Antoinette has stayed behind in Paris to enjoy a shopping day at "Bonpoint, a children's clothing store favored by wealthy Parisians and international jet-setters like Sofia Coppola. . . ." The fact that the decision to do that means another massive taxpayer expense - as you can bet they aren't flying home coach - doesn't make it into the story. Let us eat stimulus, eh?

Update: I stand corrected. The AP actually came out with an article today, noting public dissatisfaction with a stimulus bill that isin't stimulating, going so far as to state "Obama Repackages Stimulus Plans With Old Promises."

Interestingly enough, even with this unprecedented sychophancy from the MSM, our Emperor's lack of clothing is nonetheless becoming apparent to the MSM-fed electorate. Recent Gallup polls show the the President finally in the negatives, with 48% to 46% disapproving of how he is handling the economy and 51% to 45% disapproving of the massive federal spending.

Remember when the economy started into its tailspin. The causes were the housing bubble brought about by government enforced lowering of lending standards in the mortgage industry, an utterly broken bond rating system, and mark to market accounting rules. Those all led to massive secondary effects, including the catastrophic failure of derivative securities that were, ironically enough, designed to spread risk. Add to that Niall Ferguson's identification of two prime drivers - improper regulation of bank capitalization and a mistake by the Fed in its control of interest rates.

What if any of those things has Obama addressed? None. Zero. Zip. Nada.

To the contrary, Obama has used the crisis as Keynesian bonanza - and with little or no return to show for it except a national debt that is sufficiently large that we now have to seriously worry about economy crippling secondary effects. No need to take my word for it - take Fed Chairman Ben Bernanke's. This from Mr. Bernanke, via Powerline:

The administration recently submitted a proposed budget that projects the federal deficit to reach about $1.8 trillion this fiscal year before declining to 1.3 trillion in 2010 and roughly $900 billion in 2011.

As a consequence of this elevated level of borrowing, the ratio of federal debt held by the public, the nominal GDP, is likely to move up from about 40 percent before the onset of the financial crisis to about 70 percent in 2011. These developments will leave the debt-to-GDP ratio at its highest level since the early 1950s, the years following the massive debt buildup during World War II.

[E]ven as we take steps to address the recession and threats to financial stability, maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance. Prompt attention to questions of fiscal sustainability is particularly critical because of the coming budgetary and economic challenges associated with the retirement of the baby boom generation and continued increases in medical costs. ... With the ratio of debt to GDP already elevated, we will not be able to continue borrowing indefinitely to meet these demands.

In particular, over the longer term, achieving fiscal sustainability -- defined, for example, as a situation in which the ratios of government debt and interest payments to GDP are stable or declining, and tax rates are not so high as to impede economic growth -- requires that spending and budget deficits be well controlled.

If your unsure of the economist-esse there, what that means is that we need to get debt under control or face massive inflation and/or massive tax increases - if not both. As Bernanke added:

And at some point, you'll hit a point where you'll have to have both very draconian cuts and very large tax increases, which is not something we want. So in order to avoid that outcome down the road, we need to begin now to plan how we're going to get the fiscal situation into a better balance in the medium term. ...:

Have you seen any indication at all that Obama has taken heed of those words? Indeed, to the contrary, to add the coup de grĂ¢ce to the economy, there are Obama's plans to add what amounts to a massive regressive tax on the economy with cap and trade and to add to the mountain of debt with socialized medicine. He has done exactly nothing to stimulate the only engine of our economy - business. There is no fiscal restraint. There are no questions being asked. But the freight train can clearly be heard in the distance.

The last time our government tried to lift us out of an economic crisis of this proportion with massive spending was during the depression, and it didn't work then either. And unlike FDR, we have no WWII waiting in the wings to finally pull us out of this ever deepening economic crisis.

Instead of stimulating the private sector by reducing an already confiscatory corporate tax and providing tax breaks to the actual tax payers - two acts which have proven effective every time they have been tried - Obama has borrowed and spent us into penury. It was Obama who told us that if we just gave him what we wanted, then unemployment wouldn't rise over 8%. Well . . .

Unemployment is rising - now to 9.4% - far beyond where Obama promised us if we would just pass his stimulus package in 48 hours without reading it. And indeed, just today, Obama announced plans to "create 600,000" jobs by speeding up stimulus spending. That may sound nice, but we are obviously losing jobs exponentially faster than the stimulus is creating them and, most importantly, none of these stimulus jobs come with any type of permenance. These aren't private sector jobs where you invest in an employee expecting that the employee will help you become more profitable long-term. The stimulus jobs aren't permenant. They are jobs to do a certain function that ends at one of two points - when the particular task ends or the public funding ends. It is smoke and mirrors of the worst kind. Indeed, no one more accurately sums up this insanity than Mark Steyn in his article of two weeks ago, What Are We Stimulating. May the funds be with you indeed. [Update: As pointed out by ex-dissident in the comments, to add to that, do see Michelle Malkin's post on the topic of 600,000 new jobs. It's an eye opener.]

Meanwhile, in the real world of business, the U.S. has the second highest corporate tax rates in the Western world. Its not confiscatory enough for Obama, apparently. Several days ago, there were the comments from the Microsoft CEO Steven Balmer that, if Obama in fact gets his plans through to tax overseas profits under the rubric of "closing a loophole," the CEO would move many of its employees overseas. Perhaps Obama should consult Maryland as to the effective tax rate on millionaires who decide they don't want to pay confiscatory taxes. That tax rate is zero, regardless of what the tax code may say.

Then there is Obama's class warrior plan to set limits on payments to private sector employees in the banking and financial industries - even businesses that have not accepted a dime of bailout money. This is the socialist / leftist solution to all things - more regulation. Bottom line, market forces will take care of private sector compensation if it does not make economic sense. It happens when poorly run businesses fail. The government's plan to control compensation will drive the best and brightest into the overseas competitors of our financial sector or out of the financial sector entirely. We will see a wilting of this key area of our economy. Oh, and by the way, its been done before. The year, 1931. As Villagers With Torches points out, it accomplished absolutely nothing in terms of lifting us out of the depression.

And then to top off all of the economic good news, we learned a few days ago that Obama is relying on a 31 year old grossly unqualified political appointee to drive the government's programs as regards GM and Chrysler. Is it any wonder that we soon thereafter find out that the Chrysler-Fiat deal was foisted on Chrysler with no real knowledge or investigation of Fiat? Indeed, this has all the earmarks of a superficially "good idea" dreamed up by a bunch of amateurs who have then pushed it through without bothering to check whether it was a "good idea" in reality. Both Chrysler and GM are now on life support. The government has stiffed the people who provided capital to these companies in favor of patronizing the UAW - itself one of the prime causes of the GM / Chrysler downfall. Our government, with the UAW as a junior partner/parasite, now runs GM and Chrysler. As George Will writes:

Washington’s “rescue” of GM began because GM is “too big to fail,” and bankruptcy is (well, was) “unthinkable.” Big? GM’s market capitalization, $375.8 million on Wednesday, is about the size of California Pizza Kitchen’s ($340 million) — is it too big to fail? — and one-eleventh that of Harley-Davidson ($4.3 billion). Fail? If GM has not already failed, New Coke was a success.

The administration is determined to prop up GM as a jobs program for the UAW and Midwestern states rich in electoral votes. This frenzy will intensify as the administration’s decisions deepen the debacle.

I recall Charles Krauthammer opining on Fox News shortly after Obama was elected, that things wouldn't get that bad under Obama because our economic woes would mean that he didn't have enough money available to implement his "transformation of the economy." Krauthammer did not count on the perfect storm of events in which we find ourselves, and with a President at the helm whose intent to "transform our economy" trumps any consideration of the long term consequences. Krauthammer, to his credit, recognized that reality by December.

The train is coming. It couldn't be any clearer. Meanwhile, Obama is tightening the ropes tying us to the tracks. And the MSM, they're too involved in praising Obama's god-like skills with knots to ask any questions about that annoying whistle getting ever louder in the background.


Ex-Dissident said...

GW, Malkin posted about all the wonderful jobs being created by our stimulus tax dollars.

The yoots will learn important job skilz this Summer. Our organizer chief will teach them important skills like removing ipod headphones when they answer phones. Did you realize that these yoots don't know that they need to tell a supervisor about not showing up at work? Bright future awaits these Summer Stimulus program graduates. They may soon be working at our voting booths.

suek said...

"And unlike FDR, we have no WWII waiting in the wings" crystal ball is a bit cloudy. You have inside information?

I agree...we don't _see_ one on the horizon (although NK and Iran are out there)but that doesn't mean there isn't one out there.

I'd rather you were right, though.

GW said...

Hmmm, let's say that I hope that I am right. That said, as our economy weakens, there are many who I think would see a weakened U.S. as a green light to predation. Russia, China (I don't know why they are so fixed on Taiwan), and Iran are the obvious threats.